2,500 firms could go bust by end of year

At least 2,500 construction companies could fall victim to the downturn before the year is out - a sharp rise on the 1,500 declared insolvent in 2007.

More than 1,000 construction firms have already been forced to call in the administrators so far this year.

And Barry Gilbertson, a partner in the property team at PricewaterhouseCoopers' (PwC) Business Recovery Services arm, and a member of the Bank of England's property forum, warned that figure could climb much higher.

Insolvencies in the second quarter of the year showed an increase of more than 50% on the same period last year.

Gilbertson said: "I think what we are likely to be seeing is another sharp push-up in the next quarter and the quarter after that. We're only a year into this credit crunch, we've still got another 18 months to get to 2010, so it's hard to see why those numbers won't go up in a relatively steep line."

Figures from PwC, which break the figures down by sector, indicated that subcontractors have been the hardest hit so far in 2008.

General construction and civil engineering firms were one of the worst hit, with 154 insolvencies between April and June of this year.

Other areas rocked by the construction downturn in the second quarter were M&E companies, with 47 insolvencies joinery subcontractors with 25 and plumbing with 39.

The upswing in insolvencies among these firms was probably due to housebuilders sealing homes and leaving them to sit until they could be sold, Gilbertson said.

But he warned that cancelled housing projects that will now never see the light of day were also taking their toll on construction professionals.